Friday 7 September 2012
QUOTE OF THE DAY
The more you research a share, the more you follow it, the more attached to it you become and the less inclined to cut it adrift. It's a parent-child relationship and nobody wants to hear criticism of their child. Knowledge brings understanding and understanding brings affection. This is a relationship which does not plague chartists who are at best temporary foster parents to the shares they choose
- John Davis commenting on the ShareCrazy blog
ON THE SHARECRAZY BLOG
If one listens to the BBC or reads the Guardian the wicked Tories are slashing public spending. These means real cuts to front-line services which means the poorest and weakest folks in society really suffering. Ahem…it is just not true.
The facts are that Government spending is increasing in real terms (and per head of population in real terms) year on year and will continue to do so throughout this Parliament. And since tax receipts are patently not going up as fast (indeed I suspect at all) that means that the UK Government deficit and UK national debt will continue to increase. At one stroke the wicked Tories both enrage the lefties but actually do nothing to sort out the economic mess we are in.
As to those front line services, well it is all down to where the money allocated to various departments and local authorities is actually spent. You might, for instance, have thought that there was a pay freeze in the public sector. Think again. It appears that a large percentage of state employees are actually on contracts giving guaranteed annual rises. Lucky them. Meanwhile many of the rest work under a deal where their salary is in fixed bands. So a climate change outreach officer might work in a band of GBP30,000 - GBP40,000. The bands have been frozen but folks are still getting hikes by just moving up those bands.
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THIS MORNING IN LONDON
FTSE 100
5,789.19
11.85 0.21%
FTSE 250
11,774.33
97.89 0.84%
FTSE 350
3,085.83
8.89 0.29%
FTSE All Share
3,019.73
8.73 0.29%
AIM 100
3,155.05
34.31 1.10%
AIM All Share
694.01
5.35 0.78%
11:46 am
Stocks add to gains on Eurozone hopes
- FTSE 100 extends rally after ECB news
- Eyes on US data later today
- Glencore adjourns shareholder meeting, amends merger terms
The Footsie was well off its intraday high of 5,807 by Friday lunchtime, but still trading slightly higher following the massive gains made yesterday as the European Central Bank (ECB) unveiled details of its plans to hep the Eurozone.
London's benchmark index soared by 2.11% on Thursday after ECB President Mario Draghi announced that the bank would embark on unlimited bond-buying on the secondary market, buying notes with maturities between one and three years. They would be 'sterilised' so as to avoid the inflationary pressures which excessive growth in the money supply is thought to engender in the long-run. The purchases would also be tied to "strict and effective conditionality".
"ECB chief Mario Draghi finally delivered on his promise with a bond buying plan unlike one we have seen before, soothing immediate concerns about tensions in the debt markets," said market strategist Ishaq Siddiqi from ETX Capital.
10-year bond yields in Spain and Italy have fallen dramatically this morning: the borrowing rate on Spanish notes was down 29.6 basis points at 5.724% while Italy's dropped 15.1 basis points to 5.08%.
Markets will now be focused on economic data from the US out later today ahead of a crucial Federal Reserve meeting next week. In the few weeks prior to the conference, speculation about further quantitative easing (QE) measures lifted optimism on the markets, but with recent economic figures - such as yesterday's strong ADP jobs report and falling jobless claims - coming in better-than-expected, the Fed's concerns about the economy may have eased.
"Hopes of further QE are quickly fading in the US, today's non-farm payroll figure could be the final nail in the coffin," said analyst Craig Erlam from Alpari. "Already, the chances of Fed stimulus look pretty slim," he said.
Glencore down, Xstrata up after merger terms amended
Glencore's attempt to rescue the merger deal with mining giant Xstrata involves the upping of its offer to 3.05 Glencore shares per Xstrata share but also abandons the idea of this being a 'merger of equals'. Xstrata revealed that as well as increasing exchange ratio from 2.8, the new proposal envisages changes to the proposed governance arrangements, including Glencore CEO Ivan Glasenberg assuming the same role at the combined group, and the ability for Glencore to structure the transaction as a takeover offer or as a scheme of arrangement of Xstrata. Shares in Glencore sank on the news, while Xstrata surged.
Other mining stocks continued to rally on the news from the ECB yesterday, including Evraz which jumped around 12%. Sector peers Kazakhmys, Vedanta, Antofagasta and Rio Tinto also rose strongly.
Banking group Barclays was higher after Deutsche Bank upgraded the stock to 'buy' this morning. Royal Bank of Scotland and Lloyds were also in demand.
Meanwhile, insurers Resolution, Aviva and Legal & General gained after Credit Suisse said of the sector this morning: "we expect the relatively defensive balance sheets and resilient growth of the UK insurers to remain appealing in the near- to mid-term, with the valuation premium to European peers likely to be sustained."
Support services and construction group Interserve was in demand after being named as the preferred bidder to provide a range of services to National Health Service (NHS) trusts in the Midlands. The contract has a potential value of up to GBP300m and will run for seven years.
Meanwhile, defence contractor Cobham also rose after being awarded a five-year contract to supply on-board inert gas generating system nitrogen inert units for AH-64 Apache helicopters used by the US arm. The "indefinite delivery, indefinite quantity" contract is worth around $15m.
FTSE 100 - Risers
Evraz (EVR) 253.40p +11.78%
Xstrata (XTA) 1,049.00p +7.15%
ICAP (IAP) 343.40p +5.76%
Kazakhmys (KAZ) 633.50p +5.76%
Barclays (BARC) 203.70p +5.52%
Vedanta Resources (VED) 978.50p +5.44%
Antofagasta (ANTO) 1,218.00p +5.27%
Rio Tinto (RIO) 2,978.00p +4.64%
Eurasian Natural Resources Corp. (ENRC) 323.90p +4.18%
Anglo American (AAL) 1,916.00p +4.10%
FTSE 100 - Fallers
Glencore International (GLEN) 374.90p -4.45%
Diageo (DGE) 1,727.50p -2.10%
SABMiller (SAB) 2,784.00p -2.02%
Imperial Tobacco Group (IMT) 2,298.00p -1.96%
GlaxoSmithKline (GSK) 1,409.50p -1.95%
British American Tobacco (BATS) 3,181.00p -1.73%
National Grid (NG.) 687.50p -1.72%
Unilever (ULVR) 2,274.00p -1.60%
Babcock International Group (BAB) 917.50p -1.56%
Bunzl (BNZL) 1,115.00p -1.50%
FTSE 250 - Risers
Ferrexpo (FXPO) 176.30p +13.96%
Hunting (HTG) 845.00p +5.23%
Henderson Group (HGG) 110.00p +4.86%
Jupiter Fund Management (JUP) 246.70p +4.84%
Bank of Georgia Holdings (BGEO) 1,228.00p +4.78%
Man Group (EMG) 80.05p +4.64%
Talvivaara Mining Company (TALV) 137.80p +4.00%
Tullett Prebon (TLPR) 300.80p +3.83%
International Personal Finance (IPF) 315.20p +3.75%
Rank Group (RNK) 133.90p +3.72%
FTSE 250 - Fallers
Ophir Energy (OPHR) 615.00p -2.77%
Moneysupermarket.com Group (MONY) 142.10p -1.86%
De La Rue (DLAR) 1,010.00p -1.85%
New World Resources A Shares (NWR) 288.70p -1.80%
Dixons Retail (DXNS) 19.52p -1.66%
Rathbone Brothers (RAT) 1,349.00p -1.53%
Fidessa Group (FDSA) 1,448.00p -1.36%
Hansteen Holdings (HSTN) 78.00p -1.02%
TalkTalk Telecom Group (TALK) 193.30p -0.97%
Daejan Holdings (DJAN) 2,908.00p -0.92%
WHAT THE BROKERS SAY
FREE SHARE TIP OF THE DAY
Says Robert Sutherland-Smith of UK350.com
I have been keen on GKN for some time, having tipped it originally in August 2009 when it seemed underpriced against its fundamental attractions. Those attractions have recently increased; first with the announcement to acquire the Volvo aerospace business and second with an assessment of the latest six months results to 30th June 2012.
The acquisition of the Volvo business should transform GKN. The company's existing aerospace division accounts for just over a fifth of group sales and profits. It is the activity with highest trading margin at 11.2%; the average trading margin is 8.5% and the trading margin on the driveline business (nearly half of group sales) is merely 7.1%. So, one may see that an aerospace acquisition would on the face of it, increase average trading margins significantly. We are told that such an acquisition would mean the enlarged aero space contributing 40% of earnings.
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THE LATEST ON THE CRAZY BOARD
The top 5 hot company threads on the Bulletin Board:
Minera IRL
Costain Group
Reed Elsevier
IQE
Running trading thread
Click here to discuss shares with other ShareCrazy members
BOOK OF THE WEEK
By Rodney Hobson
A book review by Luka Lukic of t1ps.com
In this book Rodney Hobson aims to provide a straight forward introduction into the world of portfolio management and best practices to employ when selecting what you want to invest in. Thankfully it doesn't pretend to offer a guaranteed, one size fits all, scheme to become a millionaire, but instead attempts to compel the reader to assess what they wants to get out of their investment and then provides guidance to that end.
The book aims to explain the different behaviours of the various market sectors, and the importance of not only holding a range of shares, but diversifying them throughout the sectors to ensure a proper hedge. It also walks the reader logically through a range of factors than can, and most likely will, affect the share price and gives case studies to demonstrate the impact on real companies.
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